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Why Unsecured Business Loans are Safe for Small Businesses

Funds are the lifeline ofany business, be it a start-up or an established SMB. From keeping pace with big brands, business expansion to promoting it, funds are required for multiple purposes. So, if the revenue falls short to meet the requirements, a business loan is the best option. According to business experts, unsecured business loans are best for small businesses. Why? Let us checkout.

What is an unsecured business loan?

An unsecured loan is the one whichdoes not require any collateral. Instead of depositing assets, borrowers provide loans based on their credit history and business profits.

Importance of unsecured business loans for small business

Unsecured business loans are considered ideal for small and medium scale businesses because of the following advantages:

Fast processing

It is quick and easy to get business loans which do not require collaterals. While the general processing of a secured loan takes months, banks and NBFCs offer unsecured loans even in minutes. Small businesses often lack expensive assets to be offered as collaterals. This makes unsecured loans apt for small and medium scale businesses (SMEs).

Flexible eligibility

Sometimes it is tough for the SMEs to fulfill the eligibility criteria set by traditional lenders set for secured loans. The unsecured business loans come with a simpler eligibility criterion.

Multiple repayment options

This is a significant benefit of an unsecured loan. The loan applicant can ask for a loan from 6 months to 3 years. the repayment is possible on a daily, weekly, fortnightly or monthly basis. So small business owners can enjoy a stress-free life with an unsecured business loan.


Small businesses have multiple business requirements; from buying equipment, getting more office space to hiring more employees, a collateral- free business loan can be put to lot of uses. A secured business loan can be used only for the purpose which has been mentioned in the application. If the lender is not satisfied with the fund usage, they might reject the loan. In case of an unsecured loan, the borrower takes the ultimate call about its usage.

Flexible collateral amount

In case of a secured loan, the amount is fixed as per the value of the collateral. In case of an unsecured loan, the borrower can ask for a flexible amount. Generally, the loan amount in the case of unsecured business loans ranges between Rs50,000to Rs1 crore. The only condition is,anunsecured loan amount depends on the business profits and the credit rating.

No fear of seizure of property

In case of secured loans, the lender can seize the collateral if the loan is not repaid. Unsecured business loans are not based on any collateral, so the lender cannot take any of the business property if it defaults on payment.

So, whether you are starting a new business or expanding an existing one, an unsecured loan can be of immense help.

1 comment:

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